According to a report from the Wall Street Journal,"the big chill gripping the U.S. is heating up the natural-gas market. Prices climbed to a two-and-a-half-year high on Thursday as one of the coldest autumns in more than a decade has kept stoking demand for the heating fuel".
"The run-up has helped investors who bet that gas prices would rise once temperatures fell. But it is bad news for utilities, which use gas to fuel power plants but are prevented in many states from immediately passing higher prices along to consumers. If the rally is sustained, it will spell relief for producers, which have struggled with low prices for years as output has soared".
"The run-up has helped investors who bet that gas prices would rise once temperatures fell. But it is bad news for utilities, which use gas to fuel power plants but are prevented in many states from immediately passing higher prices along to consumers. If the rally is sustained, it will spell relief for producers, which have struggled with low prices for years as output has soared".
"As cold weather set in across the Midwest and Northeast in November, utilities have been forced to use more gas, sending prices up more than 26% since Nov. 1. The added demand has sapped supplies. Gas in storage dropped by 81 billion cubic feet last week to their lowest level for this time of year since 2008, the Energy Information Administration said Thursday.
Natural-gas futures rose 7.2 cents, or 1.7%, to $4.409 per million British thermal units Thursday, the highest price since July 2011. Natural gas is the best performer this year among the 22 commodities in the Dow Jones-UBS Commodity Index.
Investors say gas could keep climbing for as long as the cold spell lasts—potentially through December, according to some forecasters. Supplies are down from a year ago, while demand is rising as power plants switch from coal to gas.
"There's a lot of people that are getting bullish at these levels," said Jason Williams, a commodity broker for Coquest, a brokerage in Dallas. "People are worried about supply." He said he thinks prices can rise another 10% by the end of the year.
The sharp gains reflect a rare instance of tightening supplies in a market that has seen record-high production in recent years. A domestic shale-gas boom, driven by technology breakthroughs including hydraulic-fracturing and horizontal-drilling techniques, has boosted U.S. output, overwhelming demand and filling underground storage caverns around the country. Even after recent gains, gas prices remain well below the average price of more than $6/mmBtu seen in the mid-2000s, before shale production took off.
Now these caverns and storage facilities are being drained. Supplies are down 7.2% from a year ago, according to the EIA.
Other forces are driving up demand as well. Years of cheap gas have prompted many power plants to switch from coal to gas as their main source of energy. Additionally, vehicles that run on natural gas have become more popular".
